Eminent Domain Blog : Pennsylvania Eminent Domain Lawyer & Attorney : Fox Rothschild Law Firm : Condemnation, Real Estate Valuation : Philadelphia, Bucks County, Pennsylvania

The Georgia Real Estate Appraisers Board recently adopted its final regulations regarding standards for developing and reporting an “evaluation appraisal.” The regulations state that, where permitted by federal law and policies, a state-licensed or certified appraiser performing an evaluation appraisal need not comply with the Uniform Standards of Professional Appraisal Practice.

The new regulations state that a licensed or certified appraiser may offer “an appraisal which is limited in its scope and development” where an appraisal by a licensed or certified appraiser is not required by federal law. These situations include transactions with a value less than or equal to $250,000, transactions where there is no advancement of new money other than funds necessary to cover reasonable closing costs and transactions with business loans with a value equal to or less than $1 million in which rental income from the property is not the primary source of repayment.

The regulations contain a list of approximately 20 items that a certified appraiser must include in each evaluation appraisal.

Also significant: the regulations state that the evaluation must contain “an estimate of the property’s market value” and that “a valuation that does not provide a property’s market value or sufficient information and analysis to support the value conclusion is not acceptable as an evaluation appraisal. While a broker price opinion, a competitive market analysis, an automated valuation model and a tax assessment value may be useful in developing an evaluation appraisal, the information obtained from these methods of valuation is insufficient standing alone to meet all of the criteria necessary to be an evaluation appraisal.”
 

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Forty-two U.S. appraisal firms announced March 18 that they now are operating as Valbridge Property Advisors. The new firm is comprised of independent, local-market valuation firms with each office run by the local practice leader who must hold an MAI designation of the Appraisal Institute.

The new firm will specialize in office, industrial, retail, multifamily, hospitality, recreation and other special-purpose property types, and the MAI designation is held by appraisers who are experienced in the valuation and evaluation of these types of properties, as well as by those who advise clients on real estate investment decisions.

The firm is shareholder-owned with a board of directors and officers, including Richard L. Armalavage, MAI, serving as president and chief executive officer. It is headquartered in Naples, Fla. “Client demand for a strong independent national commercial property appraisal services platform has driven the formation of Valbridge,” Armalavage said in a news release. “Valbridge will be able to maximize opportunities for clients by elevating industry standards for accuracy, integrity, reporting and technology in service to current and future clients.”
 

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Legislation was introduced in the Pennsylvania General Assembly to expand the ability of real estate sales professionals to provide Broker Price Opinions and Comparative Market Analyses outside of the real estate brokerage context. This legislation would amend the Real Estate Licensing and Registration Act and the Real Estate Appraisers Certification Act.

A Comparative Market Analysis or Broker Price Opinion is developed by a licensed real estate broker, associate broker, or salesperson and provides an estimate of the probable selling price or leasing price of a particular parcel of property. Currently, a Pennsylvania licensed real estate broker or salesperson is permitted to perform a CMA in the real estate brokerage context for “the purpose of determining the asking/offering price for the property by a specific actual or potential consumer or for the purpose of securing a listing agreement with a seller.” Brokers and salespersons are currently prohibited from doing CMAs outside the brokerage context because a value or price opinion provided for a fee is defined in PA law as an “appraisal” and requires an appropriate appraisal license or certification to be held by the individual performing that work

The legislation – SB 869 – was introduced in the Pennsylvania Senate on April 18, 2013. It is sponsored by Sen. Robert M. Tomlinson and has 16 co-sponsors. Senator Tomlinson is the Chair of the Senate Consumer Protection and Professional Licensure Committee.
 

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One of the communities hardest hit by Hurricane Sandy is preparing to use eminent domain to take easements from oceanfront homeowners who are holding up a beach replenishment project, according to the Newark Star-Ledger. These homeowners won't sign easements that would allow federal officials to carry out the work. Mantoloking saw every one of its 521 homes damaged. The Mayor stated the town has no choice if it wants to survive. He said Mantoloking has either signed easements or has verbal commitments from 121 of 128 oceanfront homeowners.

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The Bipartisan Policy Center issued a report proposing changes to current appraisal policy. Although it was primarily focused on reducing the government’s role in the nation’s housing finance system, it had appraisal related recommendations. For example, it recommended banning the use of distressed home sales as comparables which the BPC said was helping to decrease local home values and buyers’ ability to secure financing.

The BPC Housing Commission is led by former U.S. Sens. George Mitchell, Mel Martinez and Kit Bond and former U.S. Housing and Urban Development Secretary Henry Cisneros. The report titled “Housing America’s Future: New Directions for National Policy,” can be found bipartisanpolicy.org/sites/default/files/BPC_Housing%20Report_web.pdf
 

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The Appraiser Qualification Board issued the Second Exposure Draft of Proposed Interpretation and Revision to the Real Property Appraiser Qualification Criteria. The AQB is an independent board of The Appraisal Foundation and composed of at least five practicing appraisers who are appointed by the Foundation’s Board of Trustees for three-year terms. Under the provisions of Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), the AQB establishes the minimum education, experience and examination requirements for real property appraisers to obtain a state certification. In addition, the AQB performs a number of ancillary duties related to real property and personal property appraiser qualifications.

“In 2006, the AQB issued an Interpretation to the Criteria, addressing continuing education for appraisers returning from active military duty. Based on recent events such as Hurricane Sandy, the AQB has recognized that appraisers impacted by a state- or federally-declared disaster may be similarly situated,” the board wrote. “Therefore, the AQB is exposing a revision to the previously adopted Interpretation (that will apply to the current, or 2008 Criteria), as well as a revision to the already adopted Criteria (that becomes effective on Jan. 1, 2015).”

The changes can be found at The Appraisal Foundation’s website appraisalfoundation.sharefile.com/d/s5763fd573e94aafa.
 

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The North Carolina House of Representatives has passed legislation to amend the state Constitution to limit certain eminent domain powers. House Bill 8 would specifically prohibit condemnation of private property except for a public use and provides for the payment of just compensation with right of trial by jury in all condemnation cases. The N.C. House passed the Bill 110-8.

The Bill – an obvious continued reaction to the U.S. Supreme Court decision in Kelo v. New London, Conn. (2005) – would put the constitutional amendment on the General Election ballot in November 2014. It does not appear to change the law other than to specifically include it in that state’s constitution.
 

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I am often asked whether governmental actions can cause a taking even if the government does not formally initiate an eminent domain case. These cases are known as "de facto" or "inverse condemnations" and are difficult to prove. However, establishing a de facto taking can have substantial benefits.

The Commonwealth Court recently affirmed a trial court’s ruling finding that we proved a de facto taking in Philadelphia.

Our client was in the process of developing a property for residential condominiums. It took substantial steps including obtaining architectural and engineering designs and lining up financing. PennDOT, however, targeted the property for a road project and announced in August, 2006 that it was going to condemn the property. PennDOT did not initiate a condemnation action until May, 2009. However, we alleged that PennDOT’s action destroyed any opportunity to develop the property for its "highest and best use" – condominiums – and caused a de facto taking.

After a two day hearing involving testimony of four experts and numerous fact witnesses, the Judge ruled that PennDOT’s actions constituted a de facto taking by December 2006. PennDOT appealed. After briefing and oral argument, the Commonwealth Court affirmed that ruling and found that we proved a de facto taking.

This has a significant impact on the case. For example, the property will now be valued as of December 2006 and not May 2009. PennDOT will also be required to pay professional fees (attorneys, experts, etc.) for the entire case.

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The US House of Representatives recently passed the "Private Property Rights Protection Act of 2012." The Act prohibits the federal government and states and municipalities from exercising its power of eminent domain over property to be used for economic development if the state or municipality receives federal economic development funds during any fiscal year in which the property is so used or intended to be used. "Economic development" is defined as the taking of private property, without the consent of the owner, and conveying or leasing that property from one private person or entity to another for commercial enterprise. Any state or municipality violating this Act would render it ineligible for any federal economic development funds for two years.

The bill is now pending in the Senate. Many states, including Pennsylvania, passed similar statues in the wake of the US Supreme Court Kelo case.

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In Shelp v. City of Scranton, a Pennsylvania trial court ruled that, in some cases, property sellers and brokers may be required to disclose the fact that a property was previously condemned to potential buyers. In that case, the defendant sold property to the plaintiff that had been previously condemned. The defendant had acquired the property from the City of Scranton after it was condemned by the City. The defendant did not disclose the prior condemnation to the plaintiff. The City later evicted the plaintiff at which point the plaintiff was informed that the property was condemned.

The plaintiff alleged that seller and real estate broker should have disclosed the prior condemnation. The facts are somewhat unclear, but it appears that the plaintiff was evicted by the City due to the unsafe condition of the property. The seller and the real estate broker filed a motion – known as preliminary objections – alleging that, as a matter of law, there was no duty to disclose the prior condemnation.

The Court denied the motion as to the seller and broker and ruled that the case could proceed. It found, for example, that the plaintiff relied upon the seller and broker’s representation that the property was fit for residential habitation and ultimately it was not fit. The defendants will now have the opportunity, as the case proceeds, to contest the factual arguments so this case is far from over.
 

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US Airways and the City of Philadelphia issued a joint statement in which they state they are working out their differences regarding the Philadelphia Airport expansion project. US Airways has objected to the costs it would bear for the expansion. The City has threatened to impose new airport-use rates if US Airways did not agree to a new 15-year airport lease by July. The joint statement said recent talks between the two sides had been "very productive" and that "our paramount objective [is] to conclude an agreement on a long-term airport lease …."

The city estimates the airport expansion project would cost $6.4 billion over 13 years. US Airways and other airlines at the airport estimate the cost at about $10.5 billion. The proposed expansion would, among other things, add a fifth runway to the airport, shift the UPS airfreight operations hub to the western side of the airport, lengthen two existing runways and build a new commuter terminal.

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I am often asked whether governmental actions can cause a taking even if the government does not formally initiate an eminent domain case. These cases are known as “de facto” or inverse condemnations and are difficult to prove. However, establishing a de facto taking can have substantial benefits. We recently were successful in establishing a de facto taking in Philadelphia.

Our client was in the process of developing a property for residential condominiums. It took substantial steps including obtaining architectural and engineering designs and lining up financing. PennDOT, however, targeted the property for a road project and announced in August, 2006 that it was going to condemn the property. PennDOT did not initiate a condemnation action until May, 2009. However, we alleged that PennDOT’s action destroyed any opportunity to develop the property for its “highest and best use” – condominiums – and caused a de facto taking.

After a two day hearing involving testimony of four experts and numerous fact witnesses, the Judge ruled that PennDOT’s actions constituted a de facto taking by December 2006. This has a significant impact on the case. For example, the property will now be valued as of December 2006 and not May 2009. PennDOT will also be required to pay professional fees (attorneys, experts, etc.) for the entire case.

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